In early July, the Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC”) jointly adopted final regulations (“Products Definition”) that further define the terms “swap” and “security-based swap,” among others, under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The Products Definition resolved certain questions about the regulatory status of transactions in energy and environmental commodities. However, thorny issues of potential overlap between CFTC and Federal Energy Regulatory Commission (“FERC”) jurisdiction remain. The CFTC appears reluctant to issue general pronouncements regarding its jurisdiction over such transactions, preferring instead to rely on a statutory mechanism that permits determinations to be made on a case-by-case basis.

Section 720(a)(1) of Dodd-Frank mandated the establishment of a Memorandum of Understanding (“MOU”) between the CFTC and FERC by January 2011. The MOU was intended to establish procedures for “(A) applying [the agencies’] respective authorities in a manner so as to ensure effective and efficient regulation in the public interest; (B) resolving conflicts concerning overlapping jurisdiction between the 2 agencies; and (C) avoiding, to the extent possible, conflicting or duplicative regulation” and to provide greater certainty to energy market participants. However, the MOU has not been completed, and CFTC Commissioner Scott D. O’Malia recently stated that it remains “a work in progress.” In comments that the energy industry may find somewhat encouraging, Commissioner O’Malia noted that he opposes “having two cooks in the kitchen” and that he favors exempting FERC tariff provisions from CFTC regulation.